UBS Lifts EUR/SEK Forecast, Cites Low Yield as Drag on Swedish Krona

UBS has revised its forecast for the euro against the Swedish krona (EUR/SEK) upward, citing the krona's persistent low-yield characteristics as a key obstacle to its appreciation, according to a new report from the bank.

Revised Krona Forecast

The Swiss bank now projects the EUR/SEK pair will trade at higher levels than previously anticipated. The updated price targets are as follows:

• December: 11.00 (revised from 10.50)
• March 2027: 10.90 (revised from 10.40)
• June 2027: 10.70 (revised from 10.30)
• September 2027: 10.60 (new forecast)

This revision is based on the expectation that Sweden's central bank, the Riksbank, will hold interest rates steady, while the European Central Bank (ECB) may implement another rate hike in September. This policy divergence would further pressure the low-yielding krona.

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Market Conditions and Norwegian Krone Outlook

UBS analysts noted that a more favorable environment for the Swedish krona would require markets to fully price in an end to the U.S. Federal Reserve's rate-hiking cycle. Such a shift would likely reduce the pressure on low-yielding currencies.

In contrast to its view on the SEK, UBS maintained its existing forecasts for the Norwegian krone (NOK). The bank highlighted that the NOK continues to benefit from one of the most attractive interest rate differentials in the G10, a hawkish stance from the Norges Bank, and Norway's status as a net energy exporter. UBS anticipates one more rate hike from both the Norges Bank and the ECB, which would maintain the current interest rate gap.